Expanding from within

Even with drought and the vagaries of the market, continued strong calf prices and the knowledge that calf supplies will tighten even more when national herd expansion begins is tempting many cow-calf producers to begin thinking about expansion. Unfortunately, if breeding females are purchased when cattle prices are at or near cyclical peaks, they can have a couple of economic strikes against them

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Even with drought and the vagaries of the market, continued strong calf prices and the knowledge that calf supplies will tighten even more when national herd expansion begins is tempting many cow-calf producers to begin thinking about expansion.

Unfortunately, if breeding females are purchased when cattle prices are at or near cyclical peaks, they can have a couple of economic strikes against them from the first day of ownership. For one thing, their higher cost means they have more ground to cover just to breakeven. And, secondly, the fact their first several calves will likely be sold into a market featuring prices that are trending down makes covering that distance even tougher.

For cyclical perspective, 2003 marked the eighth year of liquidation in the current cattle cycle, making it the longest on record. Derrell Peel, Oklahoma State University livestock marketing specialist, points out the liquidation that began in 1996 can really be defined by two phases.

From 1996 through 2000, he says, the 5.5% decline was classical and widespread with 14 of the top 20 beef cow states showing either no growth or reduced growth. Driven primarily by drought, he says 2001-2003 has featured net liquidation of another 2%, although expansion has occurred in several states. These include Kansas, Missouri, Oklahoma and Tennessee.

Whenever expansion begins, it will take more cattle out of the market and further boost prices. The good news is that since as many as 20% of the nation's cows fail to wean a calf in any given year, there appears to be plenty of opportunity for many cow-calf producers to grow their cow factory simply by increasing the efficiency of the resources they already have.

A couple of years ago, James McGrann an economist at Texas A&M University (TAMU), underscored the rule of thumb of 90% of cows getting bred and 90% of those calving and weaning a calf. The confirmation came via his delving into USDA inventory data, corroborated by a decade's worth of data from Southwest Standard Performance Analysis (SPA) participants.

Using Southwest SPA data for 1991-2000, the average weaning rate (weighted by herd size) was 79.5%. Across 363 herds and 241,884 cows, the annual cow cost for the 25% most profitable producers was $317.

Therefore, in a herd of 100 head, if one increased weaning percent by 5%, you decreased lost opportunity by 25% through cost alone. Never mind the returns from five more calves.

Multiple Returns

Moreover, selecting and managing cattle so that more of them conceive and calve earlier can make a significant difference in the annual bottom line. In an example offered up by the Noble Foundation in Oklahoma (see Table 1), for instance, the difference in getting 80% bred within the first 45 days, compared to 30% (assuming 50-head herds and that all wean a calf) can be equivalent to weaning five more calves. The gain comes from the opportunity to sell calves that are older at weaning time and thus, hopefully, weigh more.

All of that is before the upward spiral that can occur in subsequent breed-back rates courtesy of more time between calving and breeding for cows to recover and gain back some condition. Plus, females that are inherently more fertile are more likely to conceive in the earliest part of breeding season.

For instance, work by TAMU's L.R. Sprott showed the most fertile cows bred earliest, with the fewest services by the bull and produced the highest percentage of conception within the herd.

Additive Returns

Combine the increased weaning percentage with the increased number of early-bred cows cited here and you've increased production by 10% with the same number of cows. You've expanded without buying or retaining one other female.

Obviously, there are no free lunches. It's possible the cost of achieving such gains outweighs the returns. However, it's just as possible that gains in one area of production leverage more gains in another area for the same cost.

That SPA data mentioned earlier? The 25% most profitable herds in terms of net income weaned 4% more calves and weaned calves that weighed 47 lbs. more on average compared to the 25% least profitable herds. The most profitable herds also spent 70% less for annual cow carrying costs ($317) than the least profitable ($539).

All told, the most profitable herds netted an average of $139/cow, vs. the average of $216/cow lost by the least profitable ones.

Table 1. Differences in weaning distribution, projected weaning weight and total pounds weaned for two 50-head herds with different calving distributions in a 90-day breeding season.